IEKView：Support for Start-ups through the creation of Co-working Spaces
Makers are the new trend in the global scene of entrepreneurship. Governments around the world have been seeking to nurture young talent to revitalize their industries. Policy support and business environment improvement are critical to foster and encourage young entrepreneurs.
In China, the Premier of the State Council, Li Keqiang, reiterated the importance of innovation in his report to the National People's Congress (NPC) and the National Committee of the Chinese People's Political Consultative Conference in 2015. He said that “mass entrepreneurship and crowd innovation” should be the dual engine that drives the Chinese economy. His encouragement to tech professionals and university students to start their own businesses speaks of the government’s ambition to promote innovations and new ventures.
Meanwhile, the Chinese government released ‘Opinions on the Various Policy Measures Related to the Vigorous Promotion of Public Entrepreneurship and Innovation’; ‘Guidance on the Development of Co-working Spaces’; and ‘Guidance and Opinions on the Acceleration of Economic Transformation and Upgrade of Service Entities and the Development of Co-working Spaces’. The enthusiasm for entrepreneurship and innovation has continued to soar. In 2017, the State Council published ‘Opinions on Further Development of Mass Entrepreneurship and Crowd Innovations by Emphasizing Strategies to Encourage the Innovation Engine’. All these government statements and guidance mention the intention to foster the professionalism and sophistication of makers.
Co-working space is different from traditional start-up incubators. It provides all the functions required for entrepreneurship but the entry barrier is lower. Co-working space serves as a vehicle to render services to start-ups by offering low-cost services, easy access, resource integration capabilities and open platforms. Meanwhile, it provides resource sharing, entrepreneurship training, mentoring, connections with investors and financiers, assistance with applications for subsidies, business registrations, legal services and startup activities.
In 2017, the Torch Center of China’s Ministry of Science and Technology published a map showing the development of business incubators in 31 provinces, autonomous cities and municipal cities over the past three decades. The results suggest co-working spaces are concentrated in Guangdong, Beijing and Shanghai, due to geographical advantages, access to capital providers and economic/political benefits. The number of entrepreneurship and innovation centers in Guangdong is significantly higher than in other cities, provinces and autonomous zones. This is because the local governments in Shenzhen, Zhuhai and Guangdong are supportive of co-working spaces and there is a heavy flow of private capital going into mass entrepreneurship and crowd innovations. As a result, an extensive network of co-working spaces has developed in the Pearl River Delta. The combination of incubation and investment has become an important driver of co-working spaces.
Approximately 60% of co-working spaces are established by private companies. Others are founded by higher educational institutions, academic research organizations, state-owned enterprises, foreign companies and joint ventures with foreign firms. Local governments play a pivotal role in the promotion of venture capital funds and introduction of social capital.
The emergence of co-working spaces in China resolves many of the difficulties in the incubation of new ventures. However, this rapid development comes with its own challenges. Firstly, the mushrooming of co-working spaces is concentrated in Beijing, Shanghai and Guangdong (rather than being distributed evenly across all regions). Secondly, although most spaces make a profit from rental incomes, they do not have the technical competences or the ability to attract talent.
The Ministry of Science and Technology has reviewed and certified the co-working spaces with innovative business models, professional services, impressive results and smooth operations. The first group certified included 136 co-working spaces, the second included 362 and the third had 839. However, most of the co-working spaces are still not on the list, due to poor service quality. The lack of an exit mechanism has resulted in the idling and misuse of these spaces.
The other problem is that most entrepreneurs start with low hanging fruits. This has resulted in a large number of homogeneous start-ups for the Internet and hence a limited future for these companies. Many new teams are lacking in technical competences and viable business models. Those who can survive the nascent period are very few.